BUSIN

ESS

1 0 / SMALL BUS INESS

HOW I MADE IT

TAX COST OF GIVINGLOANSTOEMPLOYEESLCwrites: I have a longstandingemployeewho is looking to buy anew flat. His lender requires a largerdeposit and he has approachedmefor a loan. I am concerned that, ifhe can’t buy the property, hemightmove further away and find anotherjob. Can the company provide sucha loan?

Many companies provide employeeloans for things such as travel seasontickets, so it is feasible to do so andthere is no stipulation onwhat themoney has to be used for,writesJon Dawson, partner at Kingston SmithLLP. Inevitably, there are taxconsequences for the companyand the employee.Themain concern is that the loan

could be a benefit in kind. A loan is abenefit if it has no interest or a rate ofinterest below the taxman’s officialrate, currently 3.25%. Total loansunder £10,000 at any point in a taxyear are, however, exempt. For loansabove £10,000, the companywillhave to charge theminimum rate ofinterest or report it as a benefit inkind on a P11D form, subject toClass 1A national insurance. Thebenefit is based on the value of theunderpaid interest.If your employee owns any shares

in the company or is related to ashareholder, a further tax liabilitycould arise for the company. Arelationwould be a spouse, parent,child, sibling or partner. Forcumulative loans over £15,000, thecompanywill be liable to pay 25%corporation tax on the loan balancethat remains outstanding ninemonthsafter the company year end. This isrefundable when the loan is repaid.With regard to your employee, youcan ignore shareholdings under 5%.If youwere towrite off the loan in

future, the company and employeewould both pay national insurance.The amountwritten off would needto be declared as a benefit on a P11Dform.It is important tomake a loan

agreementwith your employee toprotect the company’s interest. Youshould also agree a salary deductionfor the repayments.

STOPSTAFFWASTINGTIMEONTHEINTERNETTNwrites: I have noticed that anumber of employees spend toomuchtime browsing the internet. I want to

introduce rules to prevent this. Howshould I proceed?

Employment tribunals place greatweight on the fact that employeesknowwhat standards are expected ofthem in theworkplace,writes PeterDone, managing director of Peninsula.It is therefore vitally important thatwhatever rules you have on anymatter aremade clear to your staff.A goodway to do this is to have awritten policy on internet usage. Itmay sound a little heavy handed tocreate an official document but thisis exactly what you need to do.Youmay create rules as you see fit.

Youwill, however, need tomake sureyou set out clearly what you deem asacceptable usage if you let staff usethe internet for work purposes. Youneed to think about whether youwillplace a blanket ban on personal usebetween certainworking hours,or whether you do notmind youremployees quickly going online tocheck their personal email account,meaning that some non-work useis permitted.Youmay choose not to place a

blanket ban on usage, but insteaddesignate certainwebsites as no-gozones— for example, gamblingwebsites. Your policy should prohibitdeliberate access of any site that couldbe seen to be offensive, obscene orindecent, such as pornography, racistor sexist material, violent images, orincitement to criminal behaviourso as to avoid a claim of harassment.Once the policy is created, you

shouldmake sure that all youremployees receive a copy, or receivenotification of its existence, lettingthem knowwhere they can find it.A policy is not effective unless you

back it up by punishing any breaches.It should set out the instances thatwill lead to disciplinary action andyou should ensure action is takenwhen breaches are discovered. Yourstaff will not respect a policy if theysee that there are no consequenceswhen they do not follow it.

Business doctor

Therewas a queue of for-eign investors at Law-rence Marazzi’s doorwhen word spread thathe was seeking cash forhis electric motorbikes.

“We had thought about takingon an overseas investor from thebeginning,” saidMarazzi.The former Royal Marine runs

Agility Global, which he startedin 2008 to build his eco-friendlyBritish motorcycles. In the pasttwo years, his brainchild has had200%annualgrowthinrevenues.It now employs 20 workers at itsheadquarters inwestLondonand28 in India.To speed up growth, Marazzi,

43, is intheprocessofraising£2mofnewinvestment.Thecompanyis about to open a production siteon a former military airfield inOxfordshire and plans to hireanother 18 staff by the end of theyear. He has rustled up £1.1m sofar, ofwhich£200,000 has comefrom a Russian backer who inturn received an entrepreneurvisa, giving the investor threeyears in Britain.Through Invest UK, an agency

that specialises in foreign directinvestment into British compa-nies,Marazziwasable to filter thelist of suitors. “We see foreigninvestment as a way to add valuein foreignmarkets. It’s never justabout the cash,” he said.For entrepreneurs such as

Marazzi, it seems foreign cash ismore readily available now thanit has ever been.Invest UK figures show a sig-

nificant rise in investors fromChina, Russia, the Middle Eastand Nigeria, all wanting to backBritain’s small and medium-sized firms.Home Office statistics back

their findings. In 2009, forexample, Chinese nationalsapplied for only 17 entrepreneurand investor visas (requiringthemtoputat least£200,000intoa British company or £1m intogovernment bonds). By autumnlast year, more than 400 Chineseinvestors had applied for thesevisas in 2014.“This wasn’t happening in

the past,” said Rupert Gather,

founder and chairman of InvestUK. “What we are seeing is anew source of capital for smallcompanies that is a result ofglobalisation.”In the past two years, Invest

UK has closed 52 deals, equatingto £160m in value and creatingmore than 200 jobs.“It’s a new world, where tra-

ditional funding systems havebeen cut off and globalisation iscreating a huge opportunity,”said Gather.For a business, taking in over-

seas money can bring a seamlessmove into foreign markets, headded. But global uncertaintiesmean there are also benefits forinvestors. “Britain is a cool placeto invest. It’s one of a number ofjustly perceived safe havens formoney and education.”According to the Office for

National Statistics, net earningsfrom inward investment havebeen rising since the 2009 eco-nomicdownturn.They increasedfrom £48.9bn in 2012 to £54.3bnin 2013.For Edmund Weil, 32, invest-

ment from a well-connectedbacker in Hong Kong was idealfor his business. Last week hesecured £250,000 for Nightjar,his stylish east London bar thatwas launched four years ago andserves up cocktails and live jazz.Moneyforhisventure,whichwasvoted one of the best bars in theworldin2013,willbeusedtoopena second London site in August.After that, expansion into conti-nental Europe and Hong Kong ison the cards.“Theplan is toput aNightjar in

a lot of keycities,” saidWeil,whostartedthebusinesswithhiswife,

Rosie. Theyhave22 staff andplanto double the number this year.“Our criteria for an investor wassomeonewhohad relevant expe-rience or someone who is con-nected and has knowledge thatcould helpwith our expansion.”The latest investment entitles

hisbackertoanentrepreneurvisaand a place on the board.“Welookedat thepossibilityof

a bank loan but for our sector,even if you have three years ofveryhealthyaccounts, theywantyou to put your house down assecurity,” saidWeil.Theimportanceofforeigncash

coming into British ccompanieshas longbeen recognisedbygov-ernment and state organisations,which have been making effortsto plug Britain as a great place toinvest and do business.“Inward investment is about

benefits to small and medium-sized firms as well as to largemultinationals,” said DominicJermey, chief executive of UKTrade & Investment (UKTI).“There are more small and

medium-sized enterprises in ourdefence manufacturing sectorthan in France, Italy, Germanyand Spain combined,” he said.“Theyallbenefitfrominvestmentbyglobal groups,whether it is formanufacturing or for research.”UKTI’sefforts ledto2,000new

inward investment projects lastyear, Jermey said. They are esti-mated to support more than111,000 British jobs.“Smaller companies should

nothesitate tobuild relationshipsand network with foreign inves-tors. The importance of inwardinvestment to the UK cannot beoverstated,” he said.

Overseas investorsloveUK start-upsand canhelpthemmove intonewmarkets,writesKiki Loizou

Someone over therecan help over here

Lawrence Marazzi is raising£2m from foreign backersto expand production of his

electric motorbikes

VICKI COUCHMAN

Beautician leaves a permanentmark with tattooed eyebrowsIN HER work as a wig cutter, Karen Bettsmet a lot of cancer patients who had losttheir hair because of chemotherapy. Shedecided to go a step further for a friendwith breast cancer.“Shehadlosthereyebrowstoo,soIbor-

rowed a machine from the tattoo artistabove my salon and inked them on,” saidBetts, who is also a make-up artist. “Itwasn’t my best work but it gave her life-changing confidence.”Inspired by the boost she had given her

friend, Betts flew to America in 1996 tostudy at the Society of Permanent Cos-meticProfessionals.Shebroughtthetreat-ments home to her beauty salon inPontefract,West Yorkshire.“I started talking to magazines about

the treatments,” saidBetts. “Thepublicitybuilt a demand for permanentmake-up.”In 2001 she founded Nouveau Contour,

which trains and supplies permanentmake-up artists for salons across Britain.It became Nouveau Beauty Group in 2004with the addition of an eyelash extensionand replacement service, called NouveauLashes. They reported total sales of £4.7mand profits in excess of £630,000 in theyear to June 2014.In 2008, Betts added High Definition

Brows to her portfolio. It was co-foundedby make-up artist Nilam Holmes Patel,who is the chief executive. “Nilam is theeyebrow queen,” said Betts. HD Browsposted sales of £2.8m and profits of£384,000 for the year to last January. Itexpects revenues to hit £4m this year.Betts is managing director of all three

companies, which have spawned otherbrands, such as Let’s Go Lashes, a20-minute, semi-permanent lash exten-sion treatment, and LVL, said to addlength, volume and lift to lashes. OthersincludeA-Lift, anon-surgical facelift, andContour Roller, a skin-rejuvenating tool.“We added different treatments to our

training programme, which have filteredout to hundreds of beauty salons,” saidBetts. “We’ve been very successful withour brands but I am always looking foranother gap in themarket.”Nouveau Beauty has supplied perma-

nent make-up training and equipment tomore than 5,000 beauty salons acrossBritain. About 150 trainees a month passthrough its academies in Pontefract,Milton Keynes and Purley, south London.The head office and a 10,000sqft ware-house are also in Yorkshire.“Of thepeoplewetrain,99%will goout

and build their own career,” said Betts,whostill performs treatmentsherself froma clinic on London’s Harley Street. “Therest will stay on and be educators for us.”ShegrewupinPontefract,anonlychild,

and was fascinated by make-up from a

Karen BettsFounder of NouveauBeauty Group

young age. “I used to watch mum puttingon make-up, thinking how beautiful shelooked.”Herparents ran a sweet shop andalso performed in clubs. “They were amimeact.At 10 Iwasonstagewithmum.”Betts attendedMinsthorpe High School

in South Elmsall. At 16 she began studyinghair and beauty at Whitwood College,Castleford,while alsoworking in a super-market to help her grandfather buy hiscouncil house.When she left college twoyears later, in

1986, she went full-time at the super-market but in the evenings made homevisits to cut hair and fit wigs. “Eventuallymy client base was large enough for meto start my own business,” she said. Hersalon in Pontefract, called Chaplins,opened in 1994.Seven years on, she started Nouveau

Contour with an £80,000 bank loan and£40,000ofsavings—thefirstandlast timeshe made a personal investment. “I wassending trainees out to salons that drainedall themoney,” she said. “I carried out the

treatments myself for six months to makeit up.”In2003she tookover thenightclubnext

door tohouseapermanentmake-upclinicand the sales team for Nouveau BeautyGroup, which she had been running fromthe salon.Her partner, Dave Hemingway, was a

self-employedcivilengineerbutjoinedthebusiness that year to helpwith expansion.“Iwasgettingverybusytrainingpeople,soI said to Dave that if he led operations andbroughtinfourclientsaweekIcouldaffordto pay his wages,” said Betts.They each own 50%of Nouveau Beauty

Group.Hemingway,47,alsoholdsanequalstake in Nouveau Lashes with Betts andBridgette Softley, anothermake-upartist.Betts still owns her first salon, renamedNouveau Hair and Beauty. She andHemingway live in Pontefract.She has teamed up with a marketing

agency to plot the expansion of NouveauLashes and HD Brows, which she hopeswill beworth£75moneday. “Wealsoplanto go globalwith the academies, and add askincare range to HD Brows.” NouveauBeautyGrouphas 17 overseas distributors.Betts, 46, continues to teach the art of

permanentmake-upandregularlyreturnsto theSocietyofPermanentCosmeticPro-fessionals to extend her training. Last yearshewon the NatWest Everywoman Awardfor top female entrepreneurs.Her advice to aspiring bosses is: “Don’t

go through life wishing you’d ever doneanything. Believe in yourself and don’t beafraid.”

Hattie Williams

Revenues from Karen Betts’ training academies and treatments topped £7m last year

Kingston Smith LLP, the charteredaccountant, and Peninsula, theemployment law firm, can adviseowner-managers on their problems.Send your questions to BusinessDoctor, The Sunday Times,1 London Bridge Street,London SE1 9GF. Advice is givenwithout legal responsibility.

bizdoc@kingstonsmith.co.uk

EmploymentLawExperts